Correlation Between Forza X1 and Marine Products

Can any of the company-specific risk be diversified away by investing in both Forza X1 and Marine Products at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Forza X1 and Marine Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Forza X1 and Marine Products, you can compare the effects of market volatilities on Forza X1 and Marine Products and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Forza X1 with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forza X1 and Marine Products.

Diversification Opportunities for Forza X1 and Marine Products

0.47

Correlation Coefficient

Forza X1  Marine Products

Very weak diversification

The 3 months correlation between Forza and Marine is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Forza X1 and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and Forza X1 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Forza X1 are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Forza X1 i.e., Forza X1 and Marine Products go up and down completely randomly.

Pair Corralation between Forza X1 and Marine Products

Given the investment horizon of 90 days Forza X1 is expected to generate 4.95 times more return on investment than Marine Products. However, Forza X1 is 4.95 times more volatile than Marine Products. It trades about 0.11 of its potential returns per unit of risk. Marine Products is currently generating about 0.09 per unit of risk. If you would invest  25.00  in Forza X1 on June 24, 2024 and sell it today you would earn a total of  3.00  from holding Forza X1 or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Forza X1  vs.  Marine Products

Forza X1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forza X1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Forza X1 and Marine Products

The main advantage of trading using opposite Forza X1 and Marine Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forza X1 position performs unexpectedly, Marine Products can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marine Products will offset losses from the drop in Marine Products' long position.

The idea behind Forza X1 and Marine Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.